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Banking, IT Sectors Witness Highest Foreign Outflows In July

Foreign investors turned net sellers for the first time in six months.

A financial trader reacts as he monitors data on computer screens at stock Exchange. (Photographer: Martin Leissl/Bloomberg)
A financial trader reacts as he monitors data on computer screens at stock Exchange. (Photographer: Martin Leissl/Bloomberg)

Banking and software services sector witnessed the highest foreign fund outflows in July after Finance Minister Nirmala Sitharaman announced a buyback tax and higher levy on the super rich in the Union Budget 2019-20.

Foreign portfolio investors pulled out $940 million and $865 million from the banking and software and services sectors respectively last month, according to the data available on National Securities Depository Ltd. Both sectors witnessed the highest fund outflows in nine months.

That’s after the NSE Nifty Bank Index declined 7 percent in July, the worst monthly returns since September 2018. The NSE Nifty IT Index fell 2 percent during the period.

Jefferies, in a post-budget note, said the top information technology companies will have to reconsider share buybacks given the limited tax advantages. Morgan Stanley, however, said that IT firms, particularly the ones with high promoter stakes, may still prefer them as these are taxed in the hands of the company, unlike dividends where both the company and shareholders pay tax.

Jefferies also said Tata Consultancy Services Ltd. and Wipro Ltd. would be impacted if the public float is increased to 35 percent.

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Foreign investors turned net sellers for the first time in six months, pulling out the highest amount from the equity market since the spree of defaults by the IL&FS Group.

Overseas investors sold $1.8 billion in the equity market last month, the highest since October 2018, according to NSDL data. Of this, they sold $979 million from July 15-31.

Finance Minister Nirmala Sitharaman, in her maiden budget, increased tax on the super rich, including foreign portfolio investors and alternative investment funds that plough funds through non-corporate structure or trusts.

India also imposed a 20 percent share buyback tax for listed companies—one of the common ways for software services providers to reward shareholders—to bring it on a par with dividends. Another proposal that unnerved the market is the plan to increase the minimum public shareholding threshold in listed companies from 25 percent to 35 percent.

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India’s equity benchmark NSE Nifty 50 declined 5.7 percent last month, clocking its worst July in 17 years.

Sectors such as banks, software and services, automobiles and auto components, oil and gas and the capital goods sector witnessed the maximum foreign fund outflows.

What Foreign Investors Bought In July

Foreign investors funnelled $780 million in miscellaneous stocks—shares which are uncategorised. Of this, $630 million was pumped in from July 16-31, NSDL data showed.

Details of investments in individual stocks during the period were not available. However, bulk-deal data revealed what some of the overseas investors bought in July.

On July 3

Bharat Financial Inclusion

  • Goldman Sachs Singapore acquired 8.78 lakh shares, or 0.63 percent equity, at Rs 904.1 apiece.
  • Integrated Core Strategies (Asia) acquired 18.06 lakh shares, or 1.29 percent equity, at Rs 898.24 apiece.
  • Vanguard Fund sold 33.14 lakh shares, or 2.36 percent equity, at Rs 899.32 apiece.
  • Ishares Core Emerging Markets Mauritius sold 9.38 lakh shares, or 0.67 percent equity, at Rs 899 apiece.

On July 4

Super Shakti Metaliks

  • Aviator Emerging Market Fund acquired 83,400 shares, or 1.45 percent equity, at Rs 407 apiece.
  • LTS Investment Fund sold 83,400 shares, or 1.45 percent equity, at Rs 407 apiece.

Allsec Technologies

  • SSD Securities acquired 6 lakh shares, or 3.94 percent equity, at Rs 286.17 apiece.
  • First Carlyle Ventures Mauritius sold 6.84 lakh shares, or 4.49 percent equity, at Rs 286.49 apiece.

On July 5

Natco Pharma

  • East Bridge Capital Master Fund acquired 15.77 lakh shares, or 0.86 percent equity, at Rs 528 apiece.

Westlife Development

  • Allard Growth Fund acquired 16.95 lakh shares, or 1.09 percent equity, at Rs 306 apiece.
  • Tree Line Advisors sold 31.3 lakh shares, or 2.01 percent equity, at Rs 305.7 apiece.

On July 10

Allsec Technologies

  • C Mackertich Pvt. Ltd. bought 5.38 lakh shares, or 3.5 percent equity, at Rs 303 apiece.
  • SSD Securities Pvt. Ltd. sold 5.38 lakh shares, or 3.5 percent equity, at Rs 303 apiece.

On July 12

Rural Electrification Corporation

  • Integrated Core Strategies (Asia) PTE Ltd. bought 1.02 crore shares, or 0.5 percent equity, at Rs 148.16 apiece.

Power Finance Corporation

  • The Windacre Partnership Master Fund LP bought 6.35 crore shares, or 2.4 percent equity, at Rs 124.85 apiece.
  • UBS Principal Capital Asia Ltd. sold 6.35 crore shares, or 2.4 percent percent equity, at Rs 124.85 apiece.

On July 17

  • Sudarshan Chemical Industries: Amansa Holdings acquired 9.63 lakh shares, or 1.39 percent equity, at Rs 315 apiece.
  • Tata Elxsi: Avendus Enhanced Return Fund sold 3.57 lakh shares, or 0.57 percent equity, at Rs 755.68 apiece.

On July 19

  • Dewan Housing Finance: California Public Employees Retirement System acquired 41.5 lakh shares, or 1.32 percent equity, at Rs 53.6 apiece.
  • Reliance Infrastructure: California Public Employees Retirement System sold 33.05 lakh shares, or 1.27 percent equity, at Rs 44.89 apiece.

On July 24

  • SBI Life Insurance: Value Line sold 65 lakh shares or 0.65 percent equity at Rs 775.06 apiece.

On July 25

  • Reliance Infrastructure: KBC Equity Fund acquired 33 lakh shares, or 1.27 percent equity, at Rs 47.43 apiece.
  • Shriram Transport Finance: New World Fund sold 15.1 lakh shares, or 0.67 percent equity, at Rs 978.68 apiece.

On July 26

Tejas Networks

  • Emerging Markets Stock Common Trust Fund sold 4.82 lakh shares, or 0.52 percent equity, at Rs 84.32 apiece.
  • Columbia Emerging Markets Fund sold 25.15 lakh shares, or 2.74 percent equity, at Rs 84.32 apiece.

On July 29

  • Future Lifestyle Fashions: Blackstone Tactical Opportunities Fund acquired 1.17 crore shares, or 6 percent equity, at Rs 466.25 apiece.

On July 30

  • Jubilant Life Sciences: East Bridge Capital Master Fund acquired 12.5 lakh shares or 0.78 percent equity at Rs 435 apiece.

Overseas investors remained buyers in the insurance sector for the eighth consecutive month.

Besides, foreign investments in the retail stocks were at 14-month high.